Friday, 18 February 2011 00:00

Notes from a veteran of the Swedish Match Wars

Written by Andrew Romeo
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Andrew Romeo reporting from a very cold RussiaHaving caught up with the news of Swedish Match’s legal initiatives vs. BAT, and especially the boys at V2, I thought a bit of perspective is in order. When I was promoted to head Gallaher Sweden AB in 2005, we were in the midst of being sued by Swedish Match for producing snus products which were almost identical, from a packaging point of view, to their market leading positions with General, Grovt, Ettan and Probe.  The product inside had also been radically improved.

Swedish Match went after Gallaher Sweden because, at the time, Gallaher had redesigned Gustavus standard in a black can, while also launching Gustavus '1e Kvalitet' (same meaning in Swedish as 'Ettan') in a dark yellow can and Gustavus 'Grovt' and Gustavus 'whiskey' in brown and reddish brown cans, respectively.  Gallaher had indeed overstepped the line in terms of copying the designs and names of SWMA's main product lines.

I personally delivered our redesigned Gustavus can (in Navy blue) to Gothenburg where SWMA scoffed at it, and admitted they'd be happier if we just went away and died.  So, we re-launched Gustavus in blue with a silver gray lid, changed 'Grovt' to "Rough Cut" and de-listed the rest.  SWMA eventually lost the right to use 'Grovt' as a proprietary descriptor, so we put it back on the can.  A rough-cut variation of 1e Kvalitet ended up going into the short-lived LD ‘Guld’ snus product.

Swedish Match very much uses its legal arm as a weapon to swat competition, and they can be arrogant bastards, especially when they start feeling they should be saving the world rather than producing and distributing addictive smokeless tobacco products to adult consumers. One leaked e-mail from Corporate Affairs when I was in Sweden which was in the press had SWMA wanting to put a hit out on a doctor who didn't believe SM snus was health food.  [EDITOR's NOTE:  There was no SnusCIA in 2005 so this is the first we're hearing of this too.  Andy is on his own with this one.]

As for V2 being accused by SWMA of selling 'dirty' snus, it's a ‘dirty’ tactic reminiscent of what Gallaher went through in Russia in the early 2000's as we ripped over 20 points of market share away from "Donskoi Tabak," a huge local cigarette factory in the south.  Every month, an article would appear in local papers there that consumers of ‘LD Gold’ cigarettes were lining up at clinics with radiation poisoning from the product. Local paid doctors were on board, just like Swedish Match has in Sweden.

The issue is not whether or not bacteria levels exceed Gothiatek standards, or even Swedish standards (the products are from Denmark, itself a fairly advanced country).  The issue is, as usual, a near-monopoly, Swedish Match, dragging a small competitor through the mud publicly.  Bacteria levels can be fixed, but a reputation cannot, and the Vogel's have every right to fight.  As GM in Sweden, I had to deal with recalls of moldy RYO product monthly because of issues with humectants at the factory in Northern Ireland. SM Distribution processed the recalls for us for a fee and said nothing.  Where snus is concerned, however, they are relentless.

My experiences with Swedish Match as a competitor, and as a superb business partner (Swedish Match Distribution) have always left me feeling like I’m in a bad marriage with a passive-aggressive partner who can actually be normal from time to time. On the corporate affairs/legal front, especially in Sweden and the EU, they are far from infallible, especially when they trumpet the health angle (zero sum gain in Brussels).  Swedes love an underdog, so V2 can only gain credibility if they play this the right way.

An Insider's Perspective
Reporting from St. Petersburg, Russia for

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